EXCLUSIVE: The UK Government must invest in low-carbon innovation now or risk significantly raising the cost of meeting the fourth and fifth carbon budgets, the chief economist of the Committee on Climate Change (CCC) has told edie.

Adrian Gault believes the business community has waited for too long for a clear direction on the low-carbon economy from Westminster

Yesterday (24 July), Business Secretary Greg Clark announced details of the first phase of a four-year £246m investment into battery technology as part of the Government's drive towards a low-carbon Industrial Strategy.

According to the CCC’s Adrian Gault, it is crucial that similar commitments are delivered for smart grid technologies and low-carbon transport if the UK is to reap the financial benefits of reducing emissions.

“Clearly, there are going to be opportunities around some of the investments that are required to meet those contributions to meeting the fifth carbon budget around things like offshore wind, nuclear and so on,” Gault said. “But the Government has also identified in its Industrial Strategy that there are other areas where the UK potentially has some advantage. It is in the power sector, but it is also in the smart grid, batteries, electric vehicles (EVs) and low-carbon finance.

“The important thing is to be developing some of those opportunities. These are areas where the UK has had some comparative advantage in the past. These are areas where you would expect to see global markets increasing, so the Government must be looking to see what it can do to improve our share in those markets globally. It is really important that the Government draws on those opportunities consistent towards a move to a low-carbon economy.”

‘Damaging uncertainty’

In its annual report released last month, the CCC advised ministers to focus on the uptake of EVs and provide strategies for carbon capture and storage (CCS) technology, energy efficiency and low-carbon heat. The Committee warned that the Government could derail the UK's low-carbon transition unless a long-term plan for these technologies was delivered urgently.

Speaking to edie after the report’s launch, Gault warned that the business community has waited for too long for clear direction from Westminster. The “damaging” uncertainty caused by delays to the proposed Clean Growth Plan could halt private sector investment and in turn increase the cost of meeting Britain’s carbon targets, he said.

“The damage is happening through delay and uncertainty,” Gault added. “What businesses want is greater certainty about what the policies and measures are going to be that are going to hit the budget. That uncertainty is damaging. And that’s bad for costs of capital as well. It potentially puts up the cost of meeting the targets to which we are committed. That’s why you need clarity from Government about its plans.”

Brexit opportunities

Uncertainty around the Government’s approach towards decarbonisation has been exacerbated by major political events such as the General Election and Brexit negotiations. But as British delegates enter the early rounds of dialogue with Brussels over the UK’s long-term relationship with the rest of the continent, the Government has stressed the green economy’s importance in a post-Brexit world.

Environment Secretary Michael Gove last week insisted that the UK has "once in a lifetime opportunity" to become global leaders on agricultural management, as part of a vow to deliver a "green" Brexit. His views are shared by Gault, who expressed a desire to see reform of the land-based common agricultural policy (CAP). Gault also spoke of an opportunity for the UK to go beyond current European emissions standards through domestic taxation policies for vehicles.

“We expect all EU environmental legislation to be transposed into UK law, but there may be some areas where we can improve on that,” he said. “That would look at things like the success of the CAP, how we link agricultural payments to environmental outcome. There may be an opportunity for the UK to do this in a way that is better for the environment and meeting our carbon targets than the CAP would have been.

“There are other things that are really important such as standards for new cars and vans, where those don’t exist beyond 2020. The EU would have been taking forward legislation or new Directives for setting those targets out for the 2020s, so in the absence in that the UK will need to put forward its own measures on what those standards should look like.

"If the targets at EU-level are stretching then it would make sense that we tie in with those levels of standards. But the UK could maybe think about the opportunity to go beyond that.”